Rise up, the Next Industry after Sewing! JICA’s Challenge for Industrial Diversification in Bangladesh
In 2022, the year that marks the 50th anniversary of the establishment of friendship between Bangladesh and Japan, an industrial park that will change the country’s industrial structure will open,” said Taro Kawachi, President of Bangladesh SEZ Ltd (BSEZ). The Bangladesh Special Economic Zone (BSEZ) held a grand opening ceremony on December 6, 2022.
The BSEZ is Bangladesh’s first international-level special economic zone (industrial park), and has long been under preparation with Japanese assistance as a symbol of Japan-Bangladesh friendship. The following is an overview of JICA’s comprehensive cooperation with the BSEZ.
JICA’s Efforts Toward Industrial Diversification, a Top Priority Issue Bangladesh continues to enjoy stable and high economic growth in the Corona Disaster. With a population of 170 million, Bangladesh is the world’s eighth most populous country, and with an average age of 27.6 years, the country’s young population is attracting significant attention for its abundant labor force and potential as a consumer market, even in fast-growing Asia. Meanwhile, the garment industry accounts for about 40% of Bangladesh’s industrial sector and more than 80% of the country’s exports. The sewing industry has maintained its competitiveness with other countries thanks to low labor costs. However, Bangladesh is showing rapid economic growth, and the soaring cost of labor is looming in the near future, so a shift in the industry is required in the future.
Mr. Ichiguchi, Director of JICA Bangladesh Office, says, “Industrial diversification and high value-adding through the promotion of FDI (Foreign Direct Investment) are the most important themes of our future support to Bangladesh. The BSEZ, Bangladesh’s first industrial park of international standards, has been the focus of the most focused efforts. This is because in Bangladesh, where various uncertainties (risks) exist, the most important factor in attracting FDI is to create a business environment in which private companies can invest in the manufacturing industry with peace of mind.
In developing the BSEZ, JICA’s unprecedented and comprehensive cooperation makes the BSEZ an attractive investment.
Unprecedented and Unique Comprehensive Cooperation in JICA’s History The major attraction of BSEZs is the infrastructure development system of BSEZs. The BSEZ in Bangladesh, which is prone to flooding and requires a large initial investment in land development alone, utilizes public funds to reduce the initial investment by private companies. It is being developed as Bangladesh’s first high-standard industrial park of international standard.
The Bangladesh government is providing the infrastructure around the BSEZ (access roads to the industrial park, etc.) and the infrastructure for the lower structures (land development for the industrial park, etc.) with government funds, and BSEZ is providing the infrastructure inside the BSEZ (access roads inside the industrial park, etc.) JICA is supporting the Bangladesh government’s infrastructure development fund with a yen loan. JICA supports the Bangladesh government’s infrastructure development through yen loans, and Japanese companies have great trust in BSEZ, which is being developed through the combined efforts of the Japanese public and private sectors. President Kawachi says, “We have received inquiries from about 40 companies, mainly Japanese companies, and sales have been strong since the opening of BSEZ.
Second, BSEZ’s investment structure is also unique: JICA supports BSEZ’s operations through (1) equity-backed finance provided by the Bangladesh government through yen loans and (2) direct investment in BSEZ through overseas investments and loans. BSEZ is also backed by the governments of Japan and Bangladesh.
In addition, to promote the entry of companies into the BSEZ, the company is also providing technical assistance in establishing a one-stop service (OSS) system to simplify the cumbersome administrative procedures for investment permits and approvals in the SEZ, as well as in establishing an OSS office in the BSEZ. Mr. Ichiguchi feels that the investment environment has steadily improved: “Investment permits in the SEZ before the start of construction, which used to take six months to a year, have been expedited with the establishment of the OSS, and construction can now begin in about three months. JICA also provides low-interest loans denominated in taka(*) to companies in the BSEZ through yen loans to promote the entry of Japanese companies into the area. This project is unique among JICA’s many initiatives in providing such multifaceted and comprehensive support, from development to operation.
Note: Bangladeshi currency
© Source JICA
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